Mortgages in Spain 2015 market update


House sales and mortgages in Spain

House sales and mortgages in Spain increased according to the Notaries by 8.4% in May 2015.

The price per meter square for purchases fell for another month suggesting any price recovery, apart from small pockets, is still going to take a few months. The decreases have stabilized but across Spain prices how have now fallen by 35% since the height of 2007 and by more than that in many areas.

Mortgages for the purchase of homes totaled 14,213 up 24.6% and average loan amount increased 6% in relation to the previous year suggesting as house prices are not going up that higher loan to values are being granted by the banks.

Annually there has now been an increase of 11.5% on number of loans and an increase of 3.6% on average loan sizes.

Where the data is extracted from

The information supplied by the Notaries is technically more up to date than the Spanish Statistical office who takes their information form deeds registered at land registry rather than completions at Notary.

Mortgages in Spain market news

Mortgage lending has steadily improved during 2015 with more and more Banks looking to increase the overall level of loans they make.

Whilst heavily focused on the indigenous market the banks are also keen to capture nonresident lending as overseas investors look to buy in Spain to take advantage of a weak Euro and lower house prices.

Whilst variable rate products remain the main offering of all Banks in Spain more and more fixed rates are being offered. Whilst linked to a number of compulsory products and with early repayment penalties much higher than for variable rate products for the first time fixed rates look to provide competitive alternatives to variable rates products.

Most fixed rates are offered for the lifetime of the loan ranging from 10 years to 25 years. A few banks offer mixed rate options with a period of fixed rate followed by a further period of variable. The mixed rate products would not seem the most sensible option given the fixed rate could be disappearing at the same time as Euribor is rising. A long term fix for an applicant of a mortgage in Spain who thinks they will run the loan for the term and does not mind having tied in products they could, possibly avoid on a variable rate product, looks to be good value for money.

Interest rates

Rates can start as low as 1.99% with many linked products and on average it is possible to secure a rate fixed for 20 years at around 3.25%. Given the Euribor would only need to rise by 1% to move a variable rate loan to this level of interest this would appear to be a good medium to long term bet.

Mortgage applicants who wish to get more flexibility and a wider range of banks to access can achieve variable rates on average around 2% above Euribor. With Euribor at 0.163% and no immediate signs of the ECB raising the base rates this provides an overall rate of 2.163%.

Variable rates as low as 1.5% above Euribor even for non residents of Spain is now seen on occasions. This kind of reduction from standard rates is only available for applicants with very low debt to income ratios and significant net wealth but for the right client can now be achieved.

Product types

The market remains static in terms of product types and apart from more fixed rates being available there remains no interest only facilities, no buy to let mortgages and non offset loans. It may be some years if not never before a more sophisticated mortgage market is seen in Spain.

60% loan to value is the favoured choice for lenders but more and more will consider 70% for the right application. It remains the case for their own properties that most banks will consider higher loan to values and more attractive rates.

Risk criterias

Criteria’s for assessment of a loan are still very closely linked to affordability ratios looking at the monthly outgoings on all debt servicing versus net incomes as shown on tax returns.

It continues to be difficult for company owners who do not draw personally all the income they could do to get an application accepted on basis of personal drawings and company performance. Whilst in Spain this is most prevalent many other countries are now taking a similar view. In the future in the absence of self assessment loans and Banks not wishing to take into account any incomes not shown on a personal tax return it looks like the European mortgage market will reflect quite closely the Spanish mortgage market rather than the other way round.

Problems with applying direct to Banks in Spain

For many bank branches who have for the first time in years been given steep lending targets the incentive to oversell what could be possible seems to be creeping back into the Market. Many personnel mistakenly offer direct applicants resident terms without taking into account the fiscal situation of the person they are talking to.

Standard best terms are outlined rather than adapting these to the actual client they are talking to. This is leading to disappointed direct bank clients who finally after a long period of underwriting fin d the loan on offer (if one is offered) bears little resemblance to what they actually need or were initially told was available.

Using a Spanish broker like IMS with experience in the market can avoid wasting time applying for something that does not exist.

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